When should you file for bankruptcy?

On Behalf of | Dec 28, 2021 | personal bankruptcy |

Illinois residents heavily in debt often wonder if there’s any way out. Bankruptcy might just be the answer. It’s important to know when you should file.

What should you consider before filing for bankruptcy?

Filing for bankruptcy should only be used as a last resort after exhausting all other options for alleviating debt. You may want to first contact your creditors to see if they are willing to negotiate. Sometimes, they’ll agree to at least remove the interest from what you owe, which can make a big difference in being able to pay.

If you’re being harassed by creditors or collection agencies, you can send a letter telling them to stop.

Credit counseling may also help. It can give you the opportunity to learn valuable lessons about debt and how to prevent a future problem. The counselor can also work with your creditors to create a debt management plan to help you be better able to pay back a smaller lump sum amount to satisfy your debt.

Why should you file for bankruptcy?

When you are heavily in debt, you might want to consider filing for Chapter 7. However, before taking that big step, it’s important to know if it’s right for you. If you haven’t been able to pay back your debt by any other means, it might be your best option. The following are some of the best reasons to file:

• Your creditors are suing you for debt
• You use one credit card to pay the balance of another
• You only pay for things with a credit card
• You’re getting a divorce
• Your home is at risk of foreclosure
• You’re considering withdrawing money from your 401(k) to pay your bills

You might worry about your credit score being impacted by bankruptcy, and it initially will. However, after the process is completed, your score can quickly improve.